Oracle Corporation released its financial results for the first quarter of the fiscal year 2027 on September 10, 2026, surpassing Wall Street's expectations. The company's revenue increased by 30% to $19.3 billion, exceeding analysts' forecast of $19.14 billion. Additionally, non-GAAP earnings per share were reported at $1.92, better than the expected $1.74.
Cloud Revenue Growth and Cash Challenges
Oracle's cloud revenue saw a significant increase of 62% to $11.6 billion, with cloud infrastructure growing by 121%. However, Oracle's stock rose by 7.8% the following day but ultimately fell by about 2%, reflecting investors' concerns regarding cash flow improvement.
Read more: CIBC Expands New ETF Lines with Three Active Funds
In this quarter, Oracle registered over $30 billion in new contracts in the AI cloud sector, increasing its remaining performance obligations to $664 billion. The company's management has projected that about half of these obligations will convert to revenue within 36 months. Free cash flow was reported at negative $5.40 billion, which is better than the analysts' forecast of negative $9.56 billion, partly due to customer prepayments.
Changes in Price Targets and Ratings
On September 11, 2026, Barclays raised its price target from $250 to $252 while maintaining an Overweight rating. UBS also increased its target from $245 to $250, citing Oracle's growth in AI. Guggenheim reiterated its Buy rating and a price target of $400. However, BMO Capital lowered its price target to $195, citing concerns about declining gross margins and software growth.
Non-GAAP gross margin has decreased to 61.0%, down about 770 basis points from last year. Oracle also disclosed $700 million in restructuring costs related to AI adoption, bringing the 2026 financial restructuring plan to about $2.8 billion. Oracle's management has declared 2027 and 2028 as peak capital expenditure years, expecting capital expenditures to be between $90 billion and $95 billion for the fiscal year 2027.
Fisher Asset Management held 13.26 million shares of Oracle worth $1.94 billion at the end of the second quarter of 2026, a 39% increase from 9.56 million shares in the previous quarter. Overall, hedge fund ownership increased to 119 funds from 115 funds between the first and second quarters of 2026.
Oracle's stock is trading at 18.59 times projected earnings, lower than Microsoft's 25.00 and Amazon's 24.04. Year-to-date, the stock has decreased by 22.90%, while the software infrastructure group has increased by about 5% and the S&P 500 has grown by about 11.85%. This indicates Oracle's underperformance compared to the overall market, despite its accelerated cloud growth.
Morgan Stanley, which maintains an Equal rating, is looking for evidence of gross margin stabilization rather than forecasts, and has pointed to the analysts' financial update on October 28, 2026, as the next test for converting commitment growth into stronger profitability.
Read more: Eli Lilly's Stock Decline Reaches 13% · Jim Cramer Introduces Texas Pacific Land Corporation (TPL) as a Great Stock
